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Friday, December 14, 2012

Google Executive Chairman Eric Schmidt in an earlier appearance at
the World Economic Forum. Photo: World Economic
Forum

Kansas City is just the first stop for Google’s ultra-fast
Google Fiber broadband network, Google Executive Chairman Eric Schmidt said
today.

Speaking at The
New York Times‘ Dealbook
Conference on Wednesday, Schmidt corrected himself after initially referring
to the first, and thus far only, Google Fiber network as an experiment.

“It’s actually not an experiment; we’re actually running it as
a business,” Schmidt said. He described the influx of bandwidth hungry startups
to the parts of Kansas City where the fiber has been laid and hinted at
expansion of the service to “hopefully more cities.”

There will be no
lack of places dying to get the service, especially after Netflix just
designated Google Fiber the “most
consistently fast ISP in America.” The average speed in November of Netflix
streaming over Google Fiber was 2.55 megabits per second. Second place was
Verizon’s own fiber network at 2.19 megabits per second.

Still, just calling Google Fiber a business doesn’t mean it
will be a viable one.

A recent report
from Goldman Sachs highlighted
by Business Insiderestimated that bringing the service to 50 million homes,
or less than half of all U.S. homes, could cost as much as $70 billion. In its
most recent quarter, Google had about $45 billion in cash on hand. In other
words, Google would need to borrow money to embark on a massive fiber build
out.

Is that really the business Google wants to be in? Not likely,
at least not at that expense and scale. Google’s bread-and-butter is still its
online advertising business, and its nascent content business. But if it turns
out Google Fiber helps Google sell more (and more valuable) ads and content,
that gives Schmidt’s comments a bit more weight. Google can justify funding a
modest expansion of Google Fiber. Will it blanket the nation? Probably not. But
just ask those happy Kansas City web heads; there’s always the chance your
neighborhood could get lucky.